OpenAI may endure massive $44 Billion losses before seeing profit in 2029 partly due to Microsoft tie-up: "The partnership with Microsoft might mean OpenAI earns less from each dollar of revenue"
By Kevin Okemwa,
1 days ago
What you need to know
A report suggests OpenAI will lose $44 billion before it becomes profitable in 2029.
The reported losses are attributed to the cost of training and running advanced AI models, employee salaries, data, and more.
Microsoft will likely get a 20% cut of OpenAI's revenue.
According to The Information , the ChatGPT maker could make $44 billion in losses before potentially becoming profitable in 2029. The report further estimates the company's revenue generation to have scaled $100 billion. The projections are based on the outlet's analysis of OpenAI's financial documents.
The projections also include the hundreds of millions of dollars spent on training and running advanced AI models, employee salaries, acquiring data, and more. While it's essential to take the information with a grain of salt as the company's trajectory may change based on several factors, it paints a picture of how much money goes into funding AI projects and keeping operations running.
Microsoft is arguably one of OpenAI's most prominent investors, betting $13 billion on the ChatGPT maker. While the tech giant has heavily integrated OpenAI's AI smarts across its tech stack, where does the AI firm's project leave it?
While speaking to Business Insider , Kate Leaman, the chief market analyst at AvaTrade, indicated:
"Developing advanced AI takes a lot of time and money, so it's expected that OpenAI would face high costs before it starts making a profit. The partnership with Microsoft might mean OpenAI earns less from each dollar of revenue, but it could help the business grow significantly in size, meaning the impact may not be as bad as initially anticipated."
The Information details how Microsoft will benefit from its partnership with OpenAI — a tad more than previously thought. According to the analysis, Microsoft will potentially get a 20% cut of OpenAI's revenue stream.
Living beyond our means are we?
OpenAI logo (Image credit: Getty Images | NurPhoto)
But how did the OpenAI land itself in such a challenging position? The hot startup generates $2 billion annually from ChatGPT and $1 billion from LLM access fees, translating to an approximate total revenue of between $3.5 billion and $4.5 billion annually. However, it spends $7 billion on training its AI models and $1.5 billion on staffing.
For context, OpenAI's latest funding round brings the total number of funding rounds the ChatGPT maker has had to 8. While the firm might have evaded bankruptcy, the funding round comes with critical concerns. For instance, the OpenAI needs to transform into a for-profit entity within the next two years or risk returning the money raised by investors.
A separate report claims that investor interest in AI technology might fade, leaving startups invested in the technology with the shorter end of the stick and insufficient funds for their advanced AI projects. This decline could open a can of worms for the ChatGPT maker, including outsider interference and hostile takeovers from investors like Microsoft. Investors raised concern over Microsoft's expenditure on AI projects , citing difficulty establishing a clear path to profitability.
We at Windows Central are scouring the internet for the best Prime Day deals and anti-Prime Day deals , but there are plenty more discounts going on now. Here's where to find more savings:
Get updates delivered to you daily. Free and customizable.
It’s essential to note our commitment to transparency:
Our Terms of Use acknowledge that our services may not always be error-free, and our Community Standards emphasize our discretion in enforcing policies. As a platform hosting over 100,000 pieces of content published daily, we cannot pre-vet content, but we strive to foster a dynamic environment for free expression and robust discourse through safety guardrails of human and AI moderation.
Local News
Comments / 0